Thursday, February 21, 2013

THE TURN?


Here is an interesting chart I've posted before showing the XLU as a ratio vs SPX (defensive utilities versus market) and the SPX is also shown here.  If you follow the logic, market participants seek safety and more defensive holdings and sell the market in scary times.  They sell their defensive stuff and go into the market when they are bullish leading to a decline in the XLU:SPX relationship.

We appear to see a turn here where investors have begun looking for safety instead of a face-ripping rally.  Hope Joe 6 Pack didn't get all in last month.





GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Sunday, February 10, 2013

PAIN AT THE PUMP (GASOLINE)

A NEW RIDE
I made two purchases in the last month that have been significant.  First, my old used car that was wonderful and cool, simply died.  I am a huge believer in buying a used car and driving it to death.  In the past, I've ridden cars till they were 11 or 12 years old and I could see the writing on the wall, and then I sold them.  In this case, with little warning, the transmission of my car simply went to transmission heaven.

The only complaint I ever had about my old Acura was that it didn't get good gas mileage since it had a nice 6 cylinder with some power.  With a crippled transmission, I went to work looking for a new car and quickly found a good deal on a used.....white Acura.  Several days after the purchase, I needed to go out of town and was simply shocked to note the difference in gas mileage that my new car received.  I noticed that I got about 28 miles to the gallon on this new car, way better than the 14 or 15 I normally got in the old one!  Wow!

So why would I take time to talk about this here in the blog?  Simply that my second purchase in early January was an old favorite, UGA (Gasoline).  The purchase also has been a good one and it seems as though there is no stopping the etf.

Take a look at the chart; - http://scharts.co/XOegHT






It looks like UGA has room to run, and the seasonal trend is also with us on this trade since many refiners shut down during this time.  If there is a classic trade to buy in January and sell in May, this is usually one that falls into that nice pattern.   





GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Friday, February 8, 2013

THE END OF NORMAL? - TBF

I think 2012 was one of those years that made you just say, "What the heck?".  Examine the following chart of TBF (short 20 year treasuries) and SPX in the background.

DECOUPLING?
The "normal" relationship between stocks and bonds suggest that when the bond price falls (yields rise) and stock indices will actually increase as you assume that money flows out of bonds (sending prices lower) and into stocks (chasing prices higher).

In the graph below, which includes TBF (the short version of treasuries)  we see that in 2010 and 2011, these two charts moved in tandem, just as expected.  Suddenly, in 2012, the relationship turned on its head and did just the opposite.  In 2013, we have a resumption of the old co-movement.

TBF and SPX - http://scharts.co/WHPScS




INVISIBLE HANDS
What could have caused this divergence from the normal relationship?  What caused it to come back into alignment?


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Saturday, February 2, 2013

WEIRD STUFF IS HAPPENING....CREDIT


BONDS ARE SIGNALING WHAT?
I'm pretty much the last guy in the world to expect an implosion in long dated treasury bonds, and this week has really been amazing to watch long bonds get smacked around.

In the past, I stated strongly that treasury bonds weren't going anywhere and in fact we'd see 30 year mortgages at sub 3% levels.  I still believe that the Fed will fight and fight to keep rates low as they don't have any choice but to purchase their cocktail of MBS, and mixed treasuries, or else the whole US economy my tank (isn't that what they say every month?).  This week, Tim from SlopeofHope.com made a great post with a very bearish call on bonds.  I was bold enough to post a picture of TLT and suggested that a gentleman's bet was in order and that we'd see $130 on TLT before we see his number of $100.  Could either happen?  Of course, but I also suggested that Tim would get some quick confirmation and that it would reinforce that he was correct in the short term, but this would only serve to make his beat down more painful, and ultimately he'd have to hand over my dollar.

Anyway, the biggest move that I am concerned about in terms of the longer term stock market is NOT the move in the 20 Year Treasury all by itself.  No, the issue is the recent strange action in the spreads between different types of bond maturities and also different fixed income assets like emerging market bonds, treasuries, and even high yield bonds.

Examine some of these relationships and take note that credit often signals big bad moves while the stock market happily rockets up 150 points on a crappy jobs report.  Bonds are usually managed by the smart money.  We'll see just how smart they are.

(This is the ratio between long bonds and 10 year treasuries).  Look at that complete collapse of the spread.  I've put the SPX behind it for you in black.  In this market environment, even though treasuries are seen as a quality safe place to hide in a panic, investors will shun the 20 and 30 year bond, they will all cram into the 10 year.  The IEF is gaining traction relative to the TLT (20 year).




EMB:TENZ - http://scharts.co/WaVg83

Here is another one that Michael Gayed uses.  I follow him on twitter;

EMB:TENZ (Ratio of Emerging Mkt bonds to a ten-year bond eft)  This one is good, because the drop in the ratio often indicates a flight to quality.  It also leads many of the drops in the SPX which is behind in black.  I've circled the recent action where the ratio is falling hard, but the SPX has just powered higher.  Which is right?




TLT - http://scharts.co/XOhqLJ

Finally, here is the TLT chart I posted on the Slope comments section.  TK looks like he's in the money......for now.

As usual, we'll hold our breath and wait for the equity market turn.  At least the credit markets have begun to show there may be trouble brewing in paradise.  Have a great weekend!







GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/